S.Africa's Telkom aims to launch pay-TV next year | Reuters

By Rebecca Harrison

JOHANNESBURG, April 20 South Africa's Telkom Media, majority owned by fixed-line phone operator Telkom (TKGJ.J), hopes to launch a cheap pay-TV service to rival Naspers' (NPNJn.J) monopoly, the company said on Friday.

Unveiling its strategy for pay-TV in Africa's richest country, Telkom Media said it would launch a cut-price satellite service with plenty of local content plus international sport and movies, aimed at the middle income bracket.

Once Telkom's broadband network is upgraded the company will offer Internet Protocol TV to customers over the web, bringing the technology to Africa for the first time.

Telkom is hunting for new sources of revenue in media and IT as it faces tougher competition in its core voice business from new rival, Neotel [NEO.UL] and cell phone operators.

"This is about the democratisation of pay-TV," Telkom Media's Chief Strategy and Operations Officer Rikus Matthyser told reporters, adding the company hoped to start offering the satellite service about 9-12 months after licences are awarded.

South Africa's communication regulator is due to award satellite and IPTV licences in the third quarter of 2007 after getting 18 bids from firms keen to break into the market, which has been dominated by Naspers' pay-TV operation DStv for 20 years.

Telkom Media said it was confident it deserved a licence and stressed the market had plenty of potential to grow given only 9 percent of South African households have pay-TV while 75 percent have a television set.

Telkom Media has 7.5 billion rand ($1.07 billion) of funding in place from Telkom, which owns 66 percent of the new firm, and financial institutions, it said.

Assuming it gets a licence, Telkom Media will sell a basic bouquet of satellite channels for less than 100 rand a month -- well below the 199 rand DStv charges for its most basic package and the 440 rand at which it offers its main 55-channel offering.

Analysts say competitors to DStv could attract a broader customer base by offering cheaper packages, but some say Naspers has already sewn up deals with the best global content providers and that newcomers will struggle to compete.

Matthyser brushed aside this concern, saying it would provide more local content and would bid for sought-after rights to premier soccer matches. It will also take on Naspers' by offering global entertainment, news and adult content.

Telkom has teamed up with Videovision Entertainment, the production firm behind Oscar-nominated film "Yesterday", and other black-owned businesses to form Telkom Media.

Telkom Media said it hoped to launch IPTV in South Africa for the first time next year, starting at 320 rand a month for a package of channels broadcast via a home broadband connection.

IPTV has been launched in several European countries as former phone monopolies hunt for new ways of making money but has yet to take off in big numbers in most markets.

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*1:Reporting by Rebecca Harrison; Editing by David Cowell; Johannesburg newsroom +27 11 775 3159; rebecca.harrison@reuters.com